Impact of Dividend Policy on Share Price Volatility: Evidence from Sri Lankan Service Sector

Abstract

This study aims to examine the relationship between dividend policy and the share price volatility (SPV) of the service sector companies listed on the Colombo Stock Exchange (CSE). The data set used in this research was compiled from financial statements of thirty data observational points of 10 listed service sector companies. After adjusting for firm size, four important variables—asset growth, earning volatility, dividend yield, and dividend payout—have been chosen as the independent variables. The volatility of the stock price has been taken as the dependent variable. The magnitude of the effects was used to examine the relationship between SPV and dividend policy. First, the relationship between SPV, dividend payout ratio (DPR), and dividend yield (DY) is regressed. Second, the relationship between SPV and dividend policy is investigated using firm size as a control variable. In both